Full day event
30 JUNE 2022 (09:00 – 18:00 hrs) (Lisbon Time)
Faculty of Law of the University of Lisbon
Banks, investment undertaking and insurance companies are licensed entities and thus subject to prudential obligations that include requirements for minimum capital and liquidity, constraints on large exposures, and specific rules on governance arrangements and compensation schemes. These entities are also subject to additional regulations such as consumer protection, anti-money laundering (AML), rules on the combat of terrorism financing (CFT) and conduct of business which apply to the different services they offer, including deposit-taking, credit underwriting, payment services and wealth management.
Prudential requirements consider all activities that an institution performs. Capital requirements are based on an assessment of the credit, market, and operational risk of the institution. Moreover, the focus of prudential requirements is the financial institution’s consolidated balance sheet, sometimes complemented with specific constraints for individual legal entities within banking groups.
Prudential regulation aims to address the impact of the failure of specific institutions on the stability of the system. To the extent that these risks stem from the vulnerability of those institutions’ balance sheets, prudential regulation follows an entity-based approach. It establishes specific requirements for entities – such as banks – which perform a combination of activities of social relevance: taking government-protected liabilities redeemable at short notice and at par value (deposits), and investing those funds in risky, longer-term, and less liquid assets (e.g., credit). These activities entail, nonetheless, considerable risks.
These traditional players of the market (the incumbents) were challenged in recent times by FinTechs. The Financial Stability Board defines FinTech as “technologically enabled financial innovation that could result in new business models, applications, processes or products with an associated material effect on financial markets and institutions and the provision of financial services”.
These developments generated profound changes in the market structure, as non-licensed FinTech players became very active in offering services that in the past were predominantly offered by heavily regulated entities, causing the so-called unbundling of banks effect, and fostering competition in the financial services market.
The entry of new players in the business of supplying finance-like products and the increasing reliance on electronic channels for their distribution, typically without the same systemic risk underlying the traditional licensing principle, is challenging the belief that strict controls over entry into finance business is necessary.
In this conference we aim to address the fundamentals behind the licensing principle and discuss its relevance in the context of FinTech driven innovation in the financial sector.
In person with prior registration (subject to room capacity – 150 seats)
(a certificate of attendance will be issued to participants who attend in person):
Through webinar zoom on: